Fred the Shred to keep £650k pension

Thursday 26th February 2009

Former Royal Bank of Scotland chief executive Sir Fred Goodwin has no intention of 'doing the right thing' and giving up his £650,000 pension, despite the bank announcing the largest annual losses in British corporate history.

Hours after RBS announced annual losses of £24.1 billion, chancellor Alistair Darling called on Sir Fred, who earned his 'the Shred' nom de guerre over a reputation for cost-cutting, to forego the pension.

But after telling MPs that the "ball is in his court", it emerged that Sir Fred had written to the Treasury to confirm he would be doing no such thing.

It has been revealed that when the government was in talks over bailing RBS out - the bank is now 70 per cent owned by the taxpayer - Sir Fred agreed to a series of "gestures", including giving up a bonus equivalent to a 15-month salary.

But the Treasury did not specify that he could not claim his pension, which takes into account previous jobs.

"You indicated you were aware of my entitlement and that no further 'gestures' would be required," Sir Fred said in his letter to Treasury minister Lord Myners.

The government has since acknowledged that it could have prevented Sir Fred from claiming his pension - which he is already doing despite being only 50 - if it had specified this during the bailout talks.

Although lawyers are looking at the possibility of forcing Sir Fred to forego his pension, Mr Darling is reduced to appealing to the executive's better self.

"We've got the lawyers looking at this," Mr Darling told the Today programme.

"But I do think that on a voluntary basis, actually, Sir Fred could resolve this problem and he could do it quite quickly."

For Sir Fred to be stripped of his pension, it would have to be proved he was negligent, which is thought to be unlikely.

"I think that is a scandal," said Treasury select committee chairman John McFall told the BBC.

"He is leaving with not just good pension, but a pension that is eye watering."

Sir Fred, speaking to the Treasury select committee this month, defended his pension not being linked to the performance of RBS.

"My pension is the same as everyone else in the bank who is in a defined benefit pension scheme," he told MPs.

"It is determined in the same way as anyone else, and anywhere else, in a defined benefit pension scheme. I am not seeking to not be linked to the share price performance of the bank; that was achieved through the shareholding in which I have lost a lot of money."

He added he personally had lost £5 million from the fall in the RBS share price.

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